Are battery packs at the heart of EV market explosion?

“The main driver for battery pack applications is the growing EV market segment,” says Milan Rosina, PhD, Principal Analyst, Power Electronics and Batteries, at Yole Développement (Yole), within the Power & Wireless division. “The EV sector is booming mainly due to the need to significantly reduce average vehicle fleet CO2 emissions to match governments’ strict CO2 emission reduction targets and thus avoid heavy penalties.”

For Shalu Agarwal, PhD, Power Electronics and Materials Analyst at Yole, within the Power & Wireless division: “The total annual demand for battery packs for the aforementioned applications will grow from US$26.6 billion in 2019 to US$137.1billion by 2025. The growth rate for different applications varies, as their market dynamics have different drivers. At Yole, we think that the demand will be mainly driven by full electric vehicles, specifically BEVs, which will represent 75.9% of the total demand in GWh by 2025. PHEVs enable big CO2 emission reductions due to their electric engines, while keeping long driving ranges thanks to their ICEs . They will take the second place in our ranking of total demand measured in GWh by 2025.”

The high level of air pollution in some big cities is driving deployment of electric buses. Buses stop frequently and can potentially charge at each stop or terminus station, making them well-suited for battery power. Electric trucks can then benefit from battery and charging station technology development for buses. The use of electric trucks in the urban environment helps further reduce air pollution.
Stationary battery energy business is not the first priority of most battery manufacturers that are focusing today mainly on electric mobility. But the market growth for stationary battery systems is growing and is mainly driven by renewable energy sources, mainly photovoltaics and wind, and electricity grid regulation. EV/PHEV charging stations have emerged as a new interesting market driver for stationary battery energy storage solutions to “smooth” strong electricity demand peaks while charging many EV/PHEVs at the same time.
The market research and strategy consulting company, Yole, releases a technology and market analysis focused on the Li-ion batteries industry: Li-ion battery packs for automotive and stationary storage applications. This report proposes a comprehensive overview of the Li-ion battery sector covering insights into battery pack components, different technologies currently used in battery packs and related technology trends and supply chain. The end applications of battery packs analyzed include PHEVs, BEVs, electric buses and trucks, as well as stationary battery energy storage applications.
Yole has developed a valuable market knowledge and technical expertise dedicated to the batteries industry. The company, with Milan Rosina and Shalu Agarwal delivers, year after year a significant collection of reports in this domain. Milan and Shalu are closely working together to get a deep understanding of the industry evolution, market needs and identify technical breakthroughs. Based in Asia, Shalu manages a close relationship with leading battery manufacturers to collect their vision of the industry and its evolution.

In this regard, Milan Rosina from Yole asserts:“The importance of BMSs is growing with increasing requirements to accurately determine remaining battery capacity, and with increasing cell and pack energy capacities. An enhanced BMS also allows better using of the energy stored in a battery pack, thus reducing needs for battery pack capacity increase.”
Shalu Agarwal adds: “There is no big technology breakthrough expected in coming years regarding battery cells and other battery pack components. The main trends will involve existing technology solutions, which will be further improved and more widely deployed. Technology and cost improvement will be steady.”Yole’s market forecast has been made during the outbreak of coronavirus disease 2019 (COVID-19). According to the analysts, the impact of this virus on automotive and battery industry is significant. It is hard to evaluate how long this crisis will last and how its duration will negatively impact the manufactured volumes of conventional vehicles and EV/PHEV. The numbers presented in this report for 2020 might be thus reduced in the case of prolonged crisis due to coronavirus.

What about the supply chain? Who are the winners?
Battery pack suppliers face significant challenges from newcomers attracted by the fast-growing market, dominant position of some cell suppliers, and strong price pressure on all battery application segments. Most battery pack suppliers are battery integrators, especially carmakers. They purchase battery cells mainly from leading suppliers like CATL, LG Chem, Panasonic and Samsung SDI, and build their battery pack using other components, including BMSs, heating/cooling systems, electrical interconnections, safety components, and housings. Carmakers are intruding ever more into battery cell design and in some cases also into cell manufacturing, as in the cases of Tesla and Daimler. Instead of purchasing cells, some battery integrators purchase battery modules directly and they just integrate modules into battery packs.
Indeed, the modular battery pack approach enables further manufacturing cost reductions and keeps the design flexibility for battery packs. Some carmakers have developed specific internal know-how and established tight supply chain partnerships. They might remain at least partially stuck with their historical technology and integration choices, while their competitors will move rapidly towards latest technologies and full vehicle electrification.
And who’s losing it?
“The companies with tight technology and supplier partnerships may lose some business in the future, but not because their technology is bad. Instead they will not easily be able to adopt the latest innovations, reduce costs by choosing optimal suppliers and follow customer need evolution rapidly enough,” affirms Shalu Agarwal. She also reveals a possible option for companies tight with their suppliers to spin-off a part of their activities into a new company and create a new brand. “It is also crucial to shorten the development time for new products and reduce the development cost,” confirms Shalu.